Pakistan’s inflation clocks in at 7.17% in October

Pakistan's CPI inflation reached 7.17% in October, up from 6.93% in September, primarily because of higher food products’ prices.

This exceeds the industry estimates of 6.8%. The average inflation in the first four months of current fiscal year is 8.68%, which is significantly lower than 28.45% in the same period last year.

Food inflation

Food inflation went up by 2.2% from September, with prices of perishable items like tomatoes increasing by 52% and onions by 28%.

Urban inflation rose by 1.1% from September, showing a 9.3% increase compared to October 2023.

Rural inflation increased by 1.5% from September 2024, up from 4.2% in October 2023.

Overall, CPI inflation was up 1.2% in October, mainly due to an 8.8% rise in perishable food items.

Outlook

Central bank’s Monetary Policy Committee (MPC) is set to meet on November 4, and it is very likely that it will decide to cut the benchmark interest rate by a further 200-250 basis points (bps).

The IMF lowered its inflation forecast to 9.5% bringing it closer to Pakistan’s own projections. Based on lower inflation outlook for fiscal year 2024-25 (FY25), Nukta anticipates the interest rate would come down further in FY25’s second half.

Based on an average inflation outlook of 8% for FY25 and favorable external outlook, the SBP would have additional room to reduce the interest rate in 2HFY25 too.

Maaz Azam, Head of Research at Optimus Capital Management told Nukta, “The FY25 inflation is expected to remain below 7.5%. We anticipate a 200 basis policy rate cut on November 04, as real interest rates are significantly positive (11% on next 12 month average national-CPI) and targeted GDP growth may remain challenging amid negative LSM growth in 2MFY25 and challenges in the agricultural sector”.